this is "options action." tonight ultimate face saver. how would you like to get your money back in facebook for free? you don't have to like zuck. you just have to like the trade on the social giant. he'll show you how to get your money back. talk about two crude cats. khouw and carter have a a way to buy halliburton stock for just $1. why were options traders renting. scott nations explains. the action begins now. live from the nasdaq at the world's largest i'm melissa lee. these are the traders here in times square. stocks rebounding. off the lows today. still feeling the pain from spain. the best third quarter in two years is in the books. there is only one stock that america seems to care about tonight and that is facebook.

shares surging more than 6% after it announces it will move into the e-commerce space. is america's long national nightmare over? let's find out. a game changer for facebook? or just short covering? >> not likely. here is the situation. the sentiment was so poor heading into the last few weeks and we saw the bounce it got off of zuckerburg's speech at the tech crunch and the way it sold off after a cover story suggesting that the stock is worth $15. today these guys are so levered to desktop advertising. the whole question is how will they monetize global. today they introduce something where they are a gift giving service where you do not have to leave facebook. there you go. all of a sudden, there is one of the things that he has been suggesting that they can do to monetize. >> he did a very nice job when he gave that little speech. any kind of news could be observed as a real positive with

a lot of leverage. why? because they have so many users. they don't have to do a lot of things right. this is a stock that trades at a high multiple. these are all speculative. you are saying you have about a billion users out there. is it worth 10, 50, 100. >> we don't know is the bottom line. >> this is a tiny step. towards monetizing their franchise. they are going to allow people to send gifts. i like single malt scotch. write that down. if that is the totality of what they will do. they'll never get back to a $100 million market cap. if you are going to go public you ought to know how you are going to make money before you do that and not figure it out afterwards. >> dan makes a good point. >> people might leave facebook and this is much more geared towards the mobile user. you don't tend to have many different programs up. you are not going to have facebook plus amazon and single malt scotch.com. in order to buy you a gift.

they'll have one thing up. if that is facebook and that person can spend more time on facebook that is more opportunity to monetize. >> that's the great point. >> think about the four inch smart phone devices. they are app sen trick, right? they are keeping you on their app. you are not going to go to amazon's app. or something like that. it is the right step for a company that hasn't given a lot of plans about how they plan to make money. >> here is the gift that keeps giving, the supply of stock that is for sale. that is really the head wind that you also have to pay attention to regardless of how you handicap the success they might have. >> i think people will still go to amazon to compare prices if nothing else. >> i don't know. >> 1.2 billion shares come into market in november. when you are bullish on facebook is this a very short term and a long term? what is this? >> i think it is so bad that at some point between now and the end of the year the stock is going to bottom. for the intermediate term.

i think there could be a dogs in the down sort of play as fresh investors take a look at it. you have to be cognizant of the shares coming in november. if you're long the shares, i don't think you buy more here. we will talk about a structure where you can get some of your money back without using a whole electr heck of a lot more risk. >> let's talk about this trade. it is a trade on facebook that costs nothing but offers huge leverage. he is doing a 1 by 2 call spread. you buy one call and finance it by buying two higher price call. of the same expiration. you want it to go to the two strikes of the call you sold. it is also where your stock gets called away. word to the wise, since you are short more than long you do this against stocks. dan, walk us through the trade. >> if i'm long a stock i don't want to add to it but i want to do an override. i want to look to january and buy the january 24.27 call spread. when i price that up versus

stuck, today i bought one the jan calls for 1.70 and sold two for a total of $1.70. 85 cents each. that structure costs me nothing. against my long i'm covered. i'm not net short win of those options. like melissa said, between 24 and 27 i make all the gains in my stock but make up to $3 in profits. if the stock is 27 or higher, my stock is called away. but i made $3 in profit. here's the deal. i have the risk to the down side as i would with the stock. if it goes below 21 hoyne 85. but i cap my gains at basically $30. that's up 37% from here in three months. i think you take that. >> one of the most common questions i get is i bought stock higher and now it is lower. what do i do to make my money back? this is one of those situations where the real benefit is you get to make the money back without the stock going back to the level you bought it because you are levering the gains in this case between the strikes. we call this a recovery trade. i think it is a great recovery

trade for people in this situation. very frequently, as you'll hear from carter, when stocks come in there is going to be resistance at some of the intermediate points. you may not get the chance to sell it at the level you bought it. this is a way to get your money bam. push >> does anybody buy it that push people will be looking at the under performers of this year and going into next year they will want to put money to work in a name like facebook? >> i would not think that works for facebook. facebook is kind of the story. you have to believe in the story and the business and the way forward but i think mike is right in that this is one of the best rehab strategies that you can find. this is better than covered calls. the math is against you a little bit but sometimes you have to know when to break the rules. this is absolutely one of those times. you get lever to the upside and not the down side. that doesn't mean the stock can't go down from here and the options aren't helping you at all. >> some people were hoping that facebook would add stocks versus options to the platform. that would be a way to monetize mobile.

right? thank goodness, we've got it here. want to double down? buy more facebook off the today's rally? 100 shares will cost you nearly $2,200. the one by two call spread which should be only used in conjunction with a long position doesn't cost a dime. nothing. it does offer huge leverage to the up side. be sure to tune in on monday. julia boorstin speaks to cheryl sandberg. in her first interview since the company's ipo. hopefully we'll get clarification on the stocks versus options business. is it going to be there or not going to be there? that's the big question. moving on here. the other big story this week has been the volatile moves in crude. in the last two weeks oil has lost nearly 7%. that is whack shares of oil. service stocks. according to our next guest created a crude opportunity for halliburton. let's call to the charts with the always slick carter braxton worth. of oppenheimer. you have u.n. and wet traffic but he managed to come here looking as dapper as ever.

carter? >> that's right. stayed dry. >> i have several charts. let's start with crude. this is a long term picture of crude. the important thing is you had the epic run up. to $150 a barrel. what is happening is you have a well defined series. of lower highs and hire lows. you are into a wedge meaning if you think the world is slowing down and crisis and all of this thing and europe is cracking up you bet down. if you think global growth will maintain and come out of it you bet up. you think the mid ills will fly in the middle east, you bet up. the point is we have reached a point of equilibrium. here is the same long-term picture of crude with the philadelphia oil and services index jux at that posed against it. look at the disconnect at this point. now at the next chart i want to show you one of the most high beta stocks within the group. same long-term charts. we have crude versus the oil service groups. versus one of the biggest oil services, halliburton. you have quite a bit of lag here. if you think crude will go up a

we do actually, a beta way to play is halliburton. if you think it is down we think halliburton is discounting it not moving. two charts on halliburton, i think tell the story. the next chart will juxtapose where we are now in relation to where we have been. we have well defined a down trend. we've broken above that down trend. that is very, very important. the second chart that looks at halliburton is the same time frame. instead of drawing a trend line, i include the moving mechanism. when this starts to flatten and turn, that is the beginning of a bearish to bullish reversal. we like halliburton. think you get paid off around 40. >> if you just took a look at the chart of halliburton independent of the chart of crude you say halliburton has room to the upside? >> that's right. it's a healing bottom kind of thing. >> if you are interested in beta this is where you get it. >> i think that beta comment is the most important one to make because the market has rallied sharply. if you think you missed the

opportunity because it lifted it hasn't. the service names have not performed so well. i think halliburton is down on the year. the stock is relatively cheap on a fundamental basis. about ten times earnings. we are expecting to see probably about 15% or 16% revenue growth year on year. i think this is certainly one of the circumstances where the stock could be poised to move. you have to be willing to overcome concerns about the global economy. >> mike is bullish when he comes to halliburton. he is simply buying a call. for everyone who thinks options are tricky, this is as simple as it can get. let's open that play book once again for those. who might be new to the show and options trading. this is a bullish strategy. when you buy a call you want the stock to rise above by more than the cost of the trade. that is all it takes. easy-peasy. anything below that level you will see losses by expiration. that's the tricky part. mike, walk us through this trade. >> so very simply i am looking to buy the january 36 calls.

cost about a buck at the time i looked. this is a simple trade because if you buy these things you only need to run through that strike by the amount of premium you are paying. the other thing is i indicated some concern about the economic data we have been getting. much of it has not been that good. we have been talking about how good it has been for stock prices but not for the results of the companies. we're going to hear that this earnings season. >> dan, what do you think of the trade? >> i don't mind it. i look at crude in the weakness as a proxy for global growth. i think it's weak. i think if you are going to play the beta trade i think you buy the calls. they are cheap. >> he is buying a longer data call. which is what you want to do when buying options. push >> one more time. push want to buy halliburton, seduced by carter braxton worth's smoothing mechanism? why not? will cost you more than $3,300. got a question send us an e-mail.

got a question, send us an e-mail. we'll answer it in the one-on-one web action right after the show. on our website. "options action".cnbc.com. you have trade updates there as well as options blogs. we want you to check it out. just sold it ahead of earnings. at one point, they were able to triple their money in just one week. but now the stock has moved against them. so how will they try to make their money back? find out when options actions returns. time for pump up the volume. the names that were heating p options traders sizzle index this week. queen latifah is not the only one bringing down the house. this company finances almost 1 million american homes. the stock is up after announcing its third quarter dividend of 50 cents a share and investors are swooning over the company's calls hoping they can benefit from the upsurge. who is it? the answer when options actions returns. like a high-speed train.

and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills, plus anytime you need it support. ♪ stocks, options, futures, and forex. get your trading on track. thinkorswim by td ameritrade. trade commission free for 60 days, plus get up to $600 when you open an account. where were they pumping up the volume? annaly traded up to 277 times the average daily volume. >> welcome back.

time for total recall when you take a look back at trades that are neither winning nor losing. last week, the wonder twins, khouw and carter, after initially winning, the trade has moved against them. they haven't lost money and here is why. >> on "options action" it is just how we do it. risk less so we can make more. that is just what carter did with the bearish trade on nike. carter thought nike shares would get tripped up. >> the long-term chart has the flavor of a fairly big -- >> got to go with my main man, carter. but going short, might as well try this. bought the october 92.5 strike put for 1.80. he needs nike to fall below that put strike price by more than the cost of the trade or below $90.70 by october expiration. paying 1.80 we are not trying to spend olympic size sums of money

here. mike, just spend less. >> sell the september weekly 92.5 put. >> well done. to spend less mike sold the september weekly put for $1.05 and created his put calendar. he also made making money easier and here is how. between the 1.80 he spent buying the put and the $1.05, mike reduced the cost to just .75 and instead of needing nike to trade below, mike can see profits below the strike of the longer dated put by more than the .75 he spent on the trade. or below $91.75 by october expiration. >> it's great. >> it sure is. usain. but it gets better. that's because the value of the put will decrease faster than the value that he thought allowing mike to do something only mr. bolt can't do, turn time into money.

>> the reason i came here was to show the world that i'm the best. >> relax because there is a tradeoff. in order to make the most money mike needs nike stock to stay just above the put he sold by the first expiration or in this case above 92.50 but below the strike of the longer dated put he is long by the second expiration by more than the cost of the trade or in this case below $91.75. and since the time of the trade -- >> going the right direction. >> well, it was. after initially falling nike shares rally to finish flat leaving khouw and carter with a tough choice. clean up the trade or hope nike trades resume the fall. now these two are in a race against time and the options fans want to know one thing, what will these to do next? >> before we answer that you might be thinking if mike was so bearish why didn't he buy the october put?

not futs futz around with the calendar business. time for options versus options where we drill down on why the strategies work for you. if mike bought the put he would be looking at a loss of 55%. but because he sold that weekly september put against it which expired worse he was able to offset the loss and is looking at a flat trade. the question is he going to stay in? let's go back to the charts. our own olympian of technical analysis. carter braxton worth. carter in. >> i think it's in the water and we are going to stay. >> this is really interesting because this is a short dated trade. we need to manage these things carefully. this trade was up quite a lot earlier today. we sent out a tweet and said if we have it on you might want to take it off. what punished the trade is the fact that the stock rallied. when you get into these types of trades you have it at your short strike on the day of expiration. that is when you cover the trade. right that instant. that is actually what probably in the trade would have decided to do. i also though am inclined to be bearish on nike going forward.

>> it is interesting the impact that nike's results had on a china-related plays. yum was battered on two sides because mcdonald's was downgraded and the nike news to contend with. which questioned the growth story in china. >> yum's growth is coming from china. 45% of the sales come from china. to me we put a trade on the show about a month ago. i bought an october 62.5. 55 puts right now. the stock is at 66. i'm 10% out of the money here. to me the company reports. this is something i want to stick with. nike had been battered on this news. they missed last quarter here. >> right. >> at this point, yum hasn't missed it. i'm interested to hear what they have to say here. that stock closed worse today. down 2%. >> scott? >> on the trade, i think the nike trade the interesting thing here is the nature changes fundamentally. when that first option expires. as far as yum, people love to trade because it is so tied to china. that is good and bad. china can be opaque and the bad is what we have seen in yum

lately. >> reminder to you as you head to break, if you want updates on our trades because things happen real time mike updated his trade this morning be sure to follow us on twitter and dan posts updates of his trades on twitter. at risk reversal. if you are on facebook stay posted throughout the week at facebook.com/optionsaction. our thanks, of course, to carter braxton worth of oppenheimer. got the final call from the options pits next.

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♪ stocks, options, futures, and forex. get your trading on track. thinkorswim by td ameritrade. trade commission free for 60 days, plus get up to $600 when you open an account. >> the royal tide navy showed sailors from the third naval command performing the popular gangnam dance. the original video by psy set a guinness world record for the most likes on youtube. it took the navy three days to

film and edit their version. it was shown at the annual party posted on youtube this week. our own version will appear on our facebook page. did you guys know that? >> what happened to "call me maybe"? >> from optional viewing to much -- must-see web tv, if you like options actions and you are looking to get into future trading futures rejoice, futures starts tuesday 1:00 p.m. eastern time on cnbc.com. live streaming show. every tuesday, thursday, 1:00 p.m. eastern time. and it is entirely dedicated to teaching you how to trade futures. from gas to goild to gold to s&p. they have got it covered. it is a groundbreaking effort and the fun begins next tuesday. i will definitely be logged in. i know mike you will be too. you were once a future's trader. >> that's correct. i was a member of -- i traded energy futures. scott as well. i think it is really important to focus on the future's market

because there is a wide world of tradeable instruments. people hear about them all the time. don't know how to trade them. now you learn how. >> time for the final call. last word from the option os pits. >> this week's web extra is how to buy protection on the s&p. >> nay tan? >> >> you're long facebook. asking how to get the money back. consider one by two call spreads against your long. mike khouw? >> a nice way to make a bullish play in halliburton is to buy the calls. >> looks like our time has expired. i'm melissa lee. for more "options action" go to our website. "options action".cnbc.com. we will see you back here next friday. right after this break money in motion is up. like a high-speed train.

and you don't want to miss it with thinkorswim by td ameritrade. you get knock-your-socks-off tools, simple one-click orders, real-time paper trading to hone your skills, plus anytime you need it support. ♪ stocks, options, futures, and forex. get your trading on track.